Abu Dhabi bank to meet over RHB Cap stake sale

PETALING JAYA: A decision on the sale of the 25% stake held by Abu Dhabi Commercial Bank (ADCB) in RHB Capital Bhd is expected after a board meeting next week, sources said.

The ADCB board is expected to meet on May 31, following which the shortlisted bidders, mostly foreign banks and private equity firms, will be assessed.

Sources said so far the bidders had been foreign, although they believed the large local banks, namely Maybank and CIMB, are still keen on a potential merger with RHB.

Analysts said just buying the 25% block would not give them control, but it is the whole of RHB that they would probably be interested in.

Both Maybank and CIMB have denied the speculation.
A banking group that had synergies with RHB is preferred as the new partner.

The Employees Provident Fund (EPF), which owns 45% of RHB Capital, has said that it would only consider a sale of its stake based on a compelling price or reason.

It had bought 82% of RHB Capital at RM4.80 per share or RM2.25bil, representing 1.8 times book value. It subsequently sold 25% to ADCB and placed a further 12% into the market.

According to recent reports, potential bidders could be Japan's Sumitomo Mitsui Financial Group, DBS owned by Singapore's Temasek which, in turn, holds 14.8% of Alliance Financial Group (AFG) and Australia and New Zealand Banking Group (ANZ) which owns 24% of AMMB.

Private equity firms Carlyle and JC Flowers are also mentioned.

In the case of DBS possibly buying the RHB stake, it is unclear if AFG will be merged with RHB or Temasek will sell off its stake in AFG, as investors can only hold one banking licence.

If ANZ were to acquire a stake in RHB, it would need to merge AMMB with RHB.

Sources said the number of bids were in “the high single digits'' with a few from private equities.

They said the price is likely “at the high end of the range above two times book value'' of about RM10.

RHB Capital closed six sen higher at RM9.29 yesterday on 7.8 million shares traded.

The stake, for which the sale was completed in 2008, was bought at RM7.20 per share or 2.2 times book value.

Analysts had said the fair value was about two times, considering its return on equity of 15% to 16% and improvements over the last three years in which profit had doubled.

RHB Bank chairman Tan Sri Azlan Zainol had said a banking group that had the synergies with RHB was preferred as the new partner.

According to Azlan, who is also CEO of EPF, if it is a private equity firm, it must have run banks before and has in place good risk management, systems, processes and business connections.

For the first quarter ended March 31, RHB Capital posted a 9.3% increase in net profit to RM382.12mil compared with the previous corresponding quarter a year ago, on higher net interest income and also income from Islamic banking.